In 1986, lawmakers drove a stake through the heart of your rental property tax deductions.
That stake, called the passive-loss rules, causes myriad complications that now, 38 years later, are still commonly misunderstood.
The Trap
In 1986, lawmakers made you shovel your taxable activities into three basic tax buckets. Looking at the buckets from a business perspective, you find the following:
1.
Portfolio bucket for your stocks and bonds
2.
Active business bucket for your material participation business activities
3.
Passive-loss bucket for your rentals plus other activities in which you do not materially participate
This article explains three escapes from the passive-loss trap so that you can realize the tax benefits from your rental losses.
Escape 1: Get Out of Jail Free
Lawmakers allow taxpayers with modified ... Log in to view full article.
